As New Zealand First, ACT, the Greens and Te Pāti Māori back a Labour Bill that calls for the full disclosure of international money transfer costs, Kiwibank chief executive Steve Jurkovich says this area is a classic example of where current banking systems can be opaque and difficult.
Jurkovich and Kiwi Group Capital Limited (KGC) Chairman David McLean spoke at a meeting of Parliament’s Finance and Expenditure Committee on Wednesday, giving a briefing on the 2024/2025 annual review of KGC.
At the meeting, committee member and NZ First MP David Wilson said they had been having discussions with various Pacific communities about remittances and how some payment options were not available to them.
In response, Jurkovich said it was an extraordinarily uncomfortable space to see people working so hard to support their whānau in the islands, “and regardless of where they’re going overseas, to be charged so much.”
“I don’t think banks have done a good job. It’s a classic example where the current banking systems are pretty opaque and quite difficult.”
“And there’s fees on each end, and so that has opened up quite a significant market for remittance processes, who I think prey on a lack of sometimes visibility, sometimes sophistication, sometimes the absolute need to get the money to a place,” he said.
Jurkovich said banks have tended to walk away from it because of the anti-money laundering (AML) compliance risk.
“I think it’s an area that’s really ripe for fintechs and other technology players to do a much better job at a lower cost.”
Jurkovich said you’d probably see global players like Airwallex be able to provide that capability.
On its website, Airwallex said it has a range of products for small to medium enterprises and large businesses, and offered foreign exchange to over 150 countries and regions, and in 45 currencies with no hidden transaction fees.
People could open what Airwallex called a “global account” in required currencies to start converting.
The website said: “You can see the money you’re transferring, an estimated delivery date, and the details of our bank-beating transfer rates (which refresh in real-time) … You can also set up Batch Transfers, and pay up to 1,000 recipients in different countries in one go.”
Jurkovich said: “I think if you can get the money to where it needs to be spent from like a Grab account in the Philippines or in Malaysia, then you’re actually giving yourself a decent chance to do a much better, lower-cost deal than needing a traditional landing place where, for instance, some banks and big global banks have pulled out of operating in those territories.”
In January Australia’s AML regulator, AUSTRAC, ordered the appointment of an external auditor to assess whether Airwallex was meeting its anti-money laundering and counter-terrorism financing obligations, “following concerns about potential non-compliance.” Airwallex said it would cooperate fully.
Bill calls for full disclosure of international money transfer costs
Put forward by Labour commerce and consumer affairs spokesperson Arena Williams, the Financial Markets (International Money Transfers) Amendment Bill was drawn from the Member’s Ballot last year. It would require banks and other money transfer services to be upfront about their fees, exchange rates and commissions.
“The price you see at the shelf should be the one you pay at the till – that applies to international money transfers too,” Williams said in Parliament, when the Bill had its first reading in April.
Williams’ Bill followed the Commerce Commission’s market study into competition for retail banking services raising concerns about international money transfers, even though they weren’t part of its narrow terms of reference focused on deposit accounts and home loans.
The Bill passed its first reading, with National being the only party to oppose it.
At the time, National MP Nancy Lu said it could add extra layers which would lead to additional costs for consumers. National MP Dan Bidois pointed to the conduct of financial institutions regime which he said; “required all financial institutions to operate fair and transparently towards consumers and the products they offer”. He also pointed to the Financial Markets Conduct Amendment Bill which clarifies obligations for financial institutions.
Following the first reading, Williams said: “New Zealand First and ACT have come to the party to make things clearer for consumers, but National continued their inaction on increasing costs.”
